Over the past five years, fintechs, banks, and corporates have seen a steady rise in the development and use of application programming interfaces (APIs) for treasury and finance.

As corporate treasurers look to APIs to improve their operations and reduce both business and financial risk, bank connectivity has quickly become the leading use case. The majority of respondents to a recent survey report from Strategic Treasurer and GTreasury indicated that API support is extremely important for both banks and TMS providers. Furthermore, 79 percent stated that they want their vendors to support APIs for bank connectivity.

How Corporate Treasurers are Using APIs

The lure of the treasury API is compelling — faster, simpler integration with TMS and ERP systems, banks, and other finance tools. The end goal is of course one that is common to most business process improvements: automation of manual processes to save time and money while reducing risk.

Common transaction communication channels such as SWIFT and EBICS typically use batch processing to transmit data in bulk at set times. For corporates looking for the elusive real-time transaction processing and transparent tracing, the concept of APIs to streamline and speed connectivity sounds particularly compelling.

Open APIs, or APIs provided directly by a bank or third-party, may also offer a lower-priced alternative. However, many businesses are still using older file formats rather than the new XML-based formats such as ISO 20022, which could hinder widespread adoption of banking APIs.

PSD2, SCA, and 3DS2 Compliance Is Driving Connectivity

The European Union’s revised Payment Services Directive (PSD2) its Strong Customer Authentication (SCA) requirement, and the credit card payments-related 3D Secure 2 (3DS2) authentication protocol for fraud prevention are all hot topics right now, and are further driving the demand for APIs.

PSD2 mandates that banks in the European Economic Area (EEA) and Australia make their data available to be shared digitally between authorized organizations. While APIs are not a requirement for compliance, for many, open APIs have emerged as the easiest method for implementing this connectivity — and banks are responding accordingly.

Fintechs and payment providers are also on the API bandwagon, providing APIs for everything from facilitating bank-ready payments to multi-factor authentication for SCA compliance and verifying customer identity for 3DS2 compliance.

Does Multibank Connectivity Require APIs?

Based on these drivers, it’s not surprising that corporate treasurers foresee the most growth (67%) in their adoption of treasury aggregation, or multibanking, technology. However, this is not synonymous with API connectivity.

In a number of cases, the APIs are in place on the back end, with banks or multibank connectivity providers — for example, a bank may integrate the SWIFT gpi tracker API with applications to automate the retrieval of payment information and payment updates.

Also, not every bank is using APIs, and even those that are may still have some custom file format conversions needed. This is especially true for centralizing and standardizing data to and from multiple banks. In many cases, those established channels like SWIFT and EBICS are operating efficiently, especially for organizations that have already migrated to ISO 20022.

So while treasury aggregators should provide support for bank and complementary technology APIs and even make their own APIs available, in some cases, treasurers will still need to have alternative methods of communication in place.

Fides Is Your One-Stop Shop

Bank connectivity is Fides’ business — and has been for decades. We are experts at managing a large volume of bank connections, which gives you the freedom to scale and change banks to suit the changing needs of your business.

Fides supports APIs as well as SWIFT, EBICS, SFTP, and more. With Fides, you aren’t locked into any one communication method, and there is no limit to the number or type of connections you can have — including our exclusive multi-network, dual-BIC solutions. We have relationships with hundreds of banks around the globe, and our security, risk and compliance and technology experts understand exactly what goes into each type of connection.

The Fides Multibanking Suite can be used as a standalone solution, or opt to connect our services to your TMS or ERP for seamless straight-through-processing.